Last week, we made our last payment of $6,400 to complete our last student debt payment. We started our journey toward financial freedom last December (2015) when we set a goal to eliminate the $97k we had in debt. The $97k consisted of three student loans ($50k, $20k and $7k) and two car loans ($13k and $7k).
|Debt Payments:||Loan Amount||Interest Rate||Payment|
|Ford Federal Student Loan||51,000.00||6.8%||500.00|
|MN State Student Loan||19,900.00||3.20%||200.00|
|Katie Student Loan||6,800.00||6.75%||200.00|
Two of my recent posts discuss some of the strategies we used to eliminate this debt. The first post reviews the five steps to eliminate debt I recommend after going through this journey:
Step 1: You need to start tracking where ALL of your money goes
Step 2: Create a budget and develop a plan to find ways to save money
Step 3: Build an emergency fund
Step 4: Develop a plan (e.g. Debt Snowball) and apply extra savings toward debt
Step 5: Begin investing for the future
The second post focuses on Step 1 and Step 2, which were vital for us eliminating our debt. It is pretty simple actually: track where you spend your money, and if you do not like where your money is going adjust your budget accordingly (or create a budget in the first place if you have not done that). We already had an emergency fund, and we created a debt snowball plan to accelerate knocking out debt.
We already had an emergency fund, and we created a debt snowball plan to accelerate knocking out debt.
What does getting out of debt really mean for us?
Eliminating our debt is a huge relief. There were a few things I was worried about before really tackling debt. First, I was worried my car would die before I paid it off because I put a significant amount of miles on my car for work. Second, even though we were putting about $700 a month toward student loans, it was still going to take us over 9 years to pay them off. Last, and most importantly, I was mad! I was mad that I had to commit $1,600/month toward debt.
Second, even though we were putting about $700 a month toward student loans, it was still going to take us over 9 years to pay them off. Last, and most importantly, I was mad! I was mad that I had to commit $1,600/month toward debt.
I understand that I needed the loans to invest in myself for college so that I could get the job I have today. However, I wish I would have known about other avenues available to pursue an engineering degree.
For example, going to community college for my first two years and then transferring to a school that has an engineering program would have saved me some serious ca$h. I am planning on writing more about options high school students have after they graduate on future posts.
Here are some ideas my wife and I are contemplating with the extra $1,600/month we have:
- Keep our emergency fund where it is at because our emergency fund can cover an additional two months of expenses.
- Invest more money.
- Set money aside each year for a vacation.
- Bolster our savings for a down payment on a house or maybe a cabin 🙂
- Start a 529 for our little one that could be on its way any day!